CHENNAI: It's redemption time for equities, which staged a strong comeback after remaining lackluster for several months, in 2012. Equities surged ahead outperforming all other asset classes, especially towards the end of the year, with the benchmark indices gaining around 27%.

This comes immediately on the back of a poor showing by equities in the previous year. Equities recorded the second worst annual performance in 2011 when key indices such as the Sensex lost over 23%. But 2012 has turned out to what some experts call a "strange year" during which all the widely traded asset classes offered decent gains.

If you had invested Rs 10000 each in equity, fixed income and gold at the beginning of the year through the mutual fund (MF) route, your portfolio would look like this on an average (as on December 17); diversified equity MFs—Rs. 13250, gold funds—Rs. 11350 and fixed income—about Rs 10940. This gives an average portfolio return of about 18.5% compared to just 5.2% in 2011. The average portfolio return stood at 14% in 2010 and 36% in 2009. The worst came in 2008 when average returns posted a decline.

But experts say that a large number of retail investors missed out on the rally in equities this year. "Retail investors have not made money and their participation has been quite low. A lot of people stopped their SIPs (systematic investment plan) in equity schemes," says Suresh Sadagopan, founder, Ladder7 Financial Advisories. "They would be ruing their decision now. Investors who bought equities in February and March would be sitting on decent gains now," he says.

"This year yet again reinforced the importance of asset allocation. Everyone was bearish about equities at the beginning of the year," say Rupesh Nagda, senior vice president, investment advisory and products, Alchemy Capital Management, a wealth management firm. "If you have a proper asset allocation plan, it is better to keep it intact," say advisors. "Overturning asset allocation would be detrimental to long-term financial goals," says Suresh.

Gold, which generated returns in excess of 20% for four consecutive years, had a lackluster performance in 2012. The yellow metal gained by only 12.8%, which is slightly better than top performing debt funds, so far this year. Silver, which had given phenomenal annual returns in the past, increased 17.6%.

Real estate too had a tepid performance in 2012 with housing prices in leading cities in the country moving up only in single digits. Residential property prices advanced by 9.2% in Pune between December 2011 and September this year, the highest among the top cities in nine months, according to Residex, the index on housing prices compiled by National Housing Bank.

Experts caution that investors should not keep jumping from one asset class to the other just because it is doing well. "Market cycles have become complex. So you can't just go by historical performance," says Anil Rego, CEO, Right Horizons, a wealth management firm. "Investors should book some profits whenever an asset class is doing extremely well."

Despite the strong performance, equity indices are still below the levels seen in January 2011. Significantly, they haven't moved past the all-time high for almost five years.